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Category: Taxation

Pakistan Revenue delivers the latest taxation news, covering income tax, sales tax, and customs duty. Stay updated with insights on tax policies, regulations, and financial developments in Pakistan.

  • Pakistan imports cell phones worth Rs84.2 billion in ten months

    Pakistan imports cell phones worth Rs84.2 billion in ten months

    KARACHI: Pakistan has imported mobile phones worth Rs84.2 billion during July – April 2018/2019 despite serious economic difficulties in the country.

    According to Pakistan Bureau of Statistics (PBS) the country imported mobile phones Rs84.2 billion during first ten months of current fiscal year as compared with Rs73.77 billion in the corresponding months of the last fiscal year, depicting increase of 14.14 percent.

    The rise import of cell phones increased despite the restrictions imposed by Pakistan Telecommunication Authority (PTA) that only registered cell phones would be activated in the country.

    Further the duty and taxes have been increased on the import of cell phones during past two mini budgets.

    Experts said that the rise in import value of cell phone was also due to depreciation in local currency against dollar.

    The import of cell phones in dollar term has decline by 7 percent to $632 million during July – April 2018/2019 as compared with $678.57 million in the corresponding period of the last fiscal year.

  • NBP provides online exchange rate facility to Pakistan Customs

    NBP provides online exchange rate facility to Pakistan Customs

    KARACHI: The Federal Board of Revenue (FBR) is receiving real time exchange rate from National Bank of Pakistan (NBP) for determination of customs valuation.

    FBR has decided to electronically link customs automated system WeBOC with the Treasury and Capital Markets Group of the National Bank of Pakistan so that the daily exchange rate of major currencies are uploaded into WeBOC directly as soon as the same are notified.

    Settlement of payments for Pakistan’s International Trade, like other countries, is done in international currencies. Value of imported goods is converted to Pak Rupees, using latest exchange rate of major currencies notified by the Treasury of the National Bank of Pakistan.

    As per current procedure, Exchange rate for various currencies is procured from Treasury and Capital Markets Group office of National Bank of Pakistan by Pakistan Customs on daily basis either manually or by downloading the same from National Bank of Pakistan website.

    It is then fed manually into the Customs automated system WeBOC for utilization in assessment of value of imports for calculating duties and taxes.

    In order to further enhance the efficiency of this operation, FBR has decided to electronically link customs automated system WeBOC with the Treasury and Capital Markets Group of the National Bank of Pakistan so that the daily exchange rate of major currencies are uploaded into WeBOC directly as soon as the same are notified.

    Necessary instructions have been issued to Director (Reforms & Automation), Karachi for development and deployment of required module in close consultation with National Bank of Pakistan on top priority basis. It is expected that this reform initiative will improve the efficiency and transparency of the process, and will also preclude any possibility of errors/omission.

  • Demonetizing high denomination currency notes recommended to eliminate avenues for untaxed funds

    Demonetizing high denomination currency notes recommended to eliminate avenues for untaxed funds

    KARACHI: The foreign investors and multinational companies have suggested the government to demonetize high denomination currency notes to eliminate parking lots for untaxed funds.

    The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals for budget 2019/2020 suggested measures to eliminate legally permissible ‘parking lots’ for untaxed funds.

    The OICCI – representative body of foreign investors in Pakistan and multinational companies – suggested that defective mode and manner of valuation of immovable properties should be addressed. “Registration of sale and purchase of real estate should only be on fair market value at the time of the transaction,” it suggested and said necessary information on market value of real estate can be easily obtained.

    It further suggested that sale of all kinds of bearer securities, prize bonds, and other such items should be stopped.

    Appropriate restrictions should be imposed on the hoarding of foreign currencies.

    “High denomination currency notes should be demonetized.”

    The OICCI also suggested introduction of books of account and cash registers.

    The Federal Board of Revenue (FBR) does not have any proper shop-wise record of approximately 35 million SMEs, which are mostly sole proprietorship or partnerships, despite the fact that jurisdictions within the tax offices are location centric, especially for small and medium sized businesses.

    It should be made mandatory for all businesses to maintain books of account and taxes should be levied on ‘net income’ basis only.

    Registration of all retail outlets and electronic cash registers should be made mandatory without any turnover thresholds, which gives rise to tax evasion.

    The installation of these registers should be inspected regularly by tax inspectors.

    The FBR should engage with representatives of small manufacturers, wholesalers and retailers and ensure their buy-in for introduction of these documentation measures so that the previous back-tracking on these actions is not repeated.

    The book keeping requirements /outline be regularly upgraded considering the best practices learnt from other neighboring countries in the region with similar business infra-structure.

  • FBR recommended tax exemption to inter-corporate dividend

    FBR recommended tax exemption to inter-corporate dividend

    KARACHI: Federal Board of Revenue (FBR) has been suggested to allow tax exemption to inter-corporate dividend for promoting group formation and consolidation and strengthen the overall corporate structure in Pakistan.

    Pakistan Tax Bar Association (PTBA) – the umbrella of tax bars in the country – in its tax proposals for budget 2019/2020, said that through Finance Supplementary (Second Amendment) Act, 2019 a new clause in Part I of the Second Schedule of Income Tax Ordinance, 2001 was inserted, which with effect from 01 July 2019 exempts dividend income derived by a company, if the recipient has availed group relief under section 59B, computed according to the following formula:-

    A x B/C; Where,

    A is the amount of dividend;

    B is the shareholding of the company receiving the dividend in the company distributing the dividends; and

    C is the total ordinary share capital of the company distributing the dividend.

    The PTBA said that pursuant to the provisions of clause (103A) of Part I of the Second Schedule, any income derived from inter-corporate dividend was exempt for group companies entitled to group taxation under section 59AA or group relief under section 59B.

    The Finance Act, 2015 then added a condition, that such exemption would only be available if the consolidated return of the group had been filed. Subsequently, the Finance Act, 2016, excluded entities entitled to group relief under section 59B from the exemption entirely.

    The above amendments created significant difficulties for corporate and industrial groups by adding multiple layers of taxation on dividends issued by group entities.

    This resulted in corporate structures becoming inefficient due to multiple taxation of the same income, on mere distribution within the group, even though no value addition was taking place. This also led to substantial litigation from various groups.

    Although, to cater the above problem an exemption has been introduced via the Second Supplementary Act, 2019, it is imperative to note that the newly inserted clause provides a relief only in the circumstances where the recipient of the dividend has availed group relief, i.e. loss has actually been surrendered between the two entities and even then, only to the extent of the shareholding that the parent entity has in its subsidiary. In effect, this means that:-

    — since the provisions of section 59B require listing within a specified period, the relief would not be available to private groups unless they are willing to list;

    — the relief would be available only to the entities actually surrendering or receiving the losses, and not all companies within the entire corporate structure;

    — based on a literal interpretation, the holding company (i.e. the entity receiving the dividend) may not be able to claim the exemption if the losses under group relief are transferred from one subsidiary to another (i.e. between sister concerns);

    — since a company cannot surrender its losses for more than three years, this is not an indefinite relief; and

    — the benefit may practically be availed only in specific cases since a company, both receiving dividends and availing group relief in the same year, is normally only possible in structures where a holding company has several subsidiaries.

    Overall, this has significantly watered-down relief compared to the demands of the corporate sector, the benefit of which may likely be availed in very few cases that may comply with all the conditions.

    It is therefore recommended to exempt inter corporate dividends as it was used to be prior to the amendments brought about by the Finance Act, 2016.

  • FBR advised to restore tax credit to sales tax registered persons

    FBR advised to restore tax credit to sales tax registered persons

    KARACHI: Federal Board of Revenue (FBR) has been proposed to restore tax credit to sales tax registered persons for documentation of the economy.

    In its tax proposals for budget 2019/2020, the Pakistan Tax Bar Association (PTBA) said that the provisions of this section were applicable in case of sales made to the sales tax registered tax registered person.

    The tax credit of 3 percent of tax payable was available to the seller for sales being made to the registered persons, however to promote documentation and registration with tax authorities it was suggested that this incentives should also be made available on purchases from registered persons as well.

    “The government abolished this incentive available to the sellers instead of extending this credit to the purchasers as well,” the PTBA said.

    It recommended that the application of above tax credit of making 90 percent sales to sales tax registered persons be restored and also be extended to persons making 90 percent of purchases from persons registered under the Sales Tax Act, 1990.

    This change would enhance the number of sales tax registered person and documentation of the economy, the PTBA added.

  • FBR issues Urdu version of Tax Amnesty Scheme – 2019

    FBR issues Urdu version of Tax Amnesty Scheme – 2019

    ISLAMABAD: Federal Board of Revenue (FBR) on Wednesday issued Urdu version of presidential ordinance for Tax Amnesty Scheme – 2019.

    The FBR said that the Urdu translated version had been issued for the facilitation of people to understand the scheme and participate/avail proactively.

    However, the FBR said that the translated version can not be referred anywhere and English version will be treated as authentic document.

  • FBR chairman warns unregistered industrial, commercial consumers of penal action

    FBR chairman warns unregistered industrial, commercial consumers of penal action

    ISLAMABAD: Syed Muhammad Shabbar Zaidi, Chairman, Federal Board of Revenue (FBR) Wednesday warned industrial and commercial consumers of gas and electricity to get registered with sales tax authorities, otherwise penal action will be initiated from July 01, 2019.

    Addressing a press conference, he said that currently there were around 341,174 industrial electricity connection and 7000 industrial gas connections, however compared to this the sales tax registration of industry was just 38,937, which he said was a huge gap.

    “It is my request to all industrial consumers to take advantage of the scheme before June 30 and may be it (the scheme) do not remain in the same shape after July 1st,” so the people using industrial utility connections should take advantage, the Chairman added.

    He said that there were possibilities that these industrial consumer connections might include some connections that come under cotton industry under law, however, added that there was dire need to check this huge difference.

    “It would be our desire that under the special clause placed in Asset Declaration Scheme, the industries falling in the category pay two percent to clear past liabilities,” the chairman added.

    He said that after July 1st, the FBR would make necessary legislation to get these industries and manufacturers registered and would also take actions.

    He urged the industrialists and manufacturers to take advantage of the Asset Declaration Scheme and clear their past sales tax liabilities by paying just two percent tax till June 30, 2019 or the law would take its due course after the expiry of the data.

    “A special clause has been included in the Asset Declaration Scheme, which was not included in it earlier, which is that if anybody is having sales tax liability he or she may clear these by paying just two percent tax,” the Chairman FBR, Muhammad Shabbar Zaidi said while addressing a press conference at FBR house here.

    He urged the media to sensitize people on the issue so that those avoiding to clear their past sales tax liabilities might realize this gap and get registered with FBR by taking advantage of the Asset Declaration Scheme.

    He said that the FBR would try its best to make it voluntary and do not indulge in harassment, as it wanted to create environment for the businesses.

    To a question, the FBR Chairman said that there were around 3.1 million commercial consumers, however added that the strategy on how to get the unregistered consumers to get registered with FBR would be shared with media.

    To another questions, the Chairman FBR said that there were over one lack companies registered with the Securities and Exchange Commission of Pakistan (SECP), however just 50,000 were filing their returns.

    He said that it was high time for those having industrial connections to get registered with FBR and take benefit of the Tax Declaration Scheme.

    It is pertinent to mention here that the government last week had announced Asset Declaration Scheme, providing one more opportunity to all Pakistani citizens to declare and legalize undisclosed assets inside and outside the country by paying just four percent taxes on all assets other than real estate.

    The scheme would be applicable till June 30, and all Pakistan citizens, other than those holding public offices or their dependents, would be able to take benefit from it.

    The basic purpose of the scheme was to document economy and make the dead assets functional to promote economy by encouraging businessmen to participate in the legal economy.

  • FBR restructuring proposed to make autonomous body

    FBR restructuring proposed to make autonomous body

    KARACHI: The government has been proposed to make Federal Board of Revenue (FBR) as an autonomous body on similar line as State Bank of Pakistan.

    The Overseas Chamber of Commerce and Industry (OICCI) in its budget proposals for 2019/2020 suggested restructuring of FBR as an independent governing body.

    It suggested that FBR should be made an autonomous body on similar lines as State Bank of Pakistan, SECP, and Internal Revenue Services (IRS) of United States.

    FBR should operate and work in a corporate governance structure with a Board of Directors, vested with powers like that of the Boards of Public listed companies.

    The Chairman of FBR and fifty percent of the Board members may be nominated by the government (Ministries of Finance, Law, and Commerce) and, the remaining fifty percent Board members should be nominated by bodies like OICCI, PBC and ICAP.

    A transparent accountability system in tax administration should be introduced, and reasonable independence and empowerment given to various operational positions.

    The external audit of FBR should be done annually, by an independent international audit firm whose report should be presented and fully discussed in the Tax Policy Board meeting.

    There should also an Internal Audit function within the FBR for an effective ongoing internal audit reporting directly to the independent members of the Board nominated by the Trade bodies.

    Apart from revenue collection a key function of the FBR should be to address coordination issues between federal and provincial revenue authorities, with monthly meetings to ensure ease of doing business for taxpayers.

  • Car imports massively fall by 45pc in 10 months

    Car imports massively fall by 45pc in 10 months

    KARACHI: The import of motor cars sharply declined by 45 percent during first ten months of current fiscal year owing to restriction imposed of duty and tax payment through foreign currency account and verification of remittances through banks.

    According to officials statistics made available to PkRevenue.com on Tuesday, the import of cars in completely built unit (CBU) was at $213.37 million during July – April 2018/2019 as compared with $388.835 million in the corresponding period of the last fiscal year.

    The ministry of commerce through SRO 52(I)/2019 dated January 15, 2019 imposed the restriction of payment of duty and taxes through foreign remittances.

    The SRO stated: “All vehicles in new/used condition to be imported under transfer of residence, personal baggage or under gift scheme, the duty and taxes shall be paid out of foreign exchange arranged by Pakistan Nationals themselves or local recipient supported by bank encashment certificate showing conversion of foreign remittance to local currency, as under,

    a. the remittance for payment of duties and taxes shall originate from the account of Pakistani national sending the vehicle from abroad; and

    b. the remittance shall either be received in the account of Pakistani national sending the vehicle from abroad or, in case, his account is non-existent or inoperative, in the account of his family.”

    The customs sources said that the besides restrictions of the ministry of commerce the import of cars was also declined due to restriction on non-filers of income tax in registration with provincial registration authorities.

    Through Finance Act, 2018 the government imposed ban on non-filers for registering both imported and locally assembled cars. The government, however, lifted the ban on non-filers through Finance Supplementary (Second Amendment) Act, 2019 only for locally assembled cars.

  • FBR suggested reducing income tax rate for banks

    FBR suggested reducing income tax rate for banks

    KARACHI: Federal Board of Revenue (FBR) has been advised to reduce income tax rates for banking companies in line with general corporate tax rates.

    The Overseas Investors Chamber of Commerce and Industry (OICCI) in its tax proposals for budget 2019/2020, said that the banking sector tax rates have not been reduced in line with the general corporate tax rates.

    Furthermore, Finance Supplementary (Second Amendment) Bill 2019, proposed to again amend the First Schedule to the Income Tax Ordinance 2001, whereby, Super Tax of 4 percent is applicable on banks from tax year 2018 to tax year 2021.

    The banks, in compliance with the prevailing taxation regime have already closed the tax year 2018 (accounting year 2017) and income tax returns have already been duly filed/assessed.

    As a result of the proposed abovementioned retrospective application from tax year 2018 (accounting year 2017), banks would now have to effectively pay super tax for two years or 8 percent instead of 4 percent in tax year 2019 i.e. 4 percent already paid in advance for tax year 2019 along with retrospective charge of 4 percent now being proposed for tax year 2018.

    The OICCI suggested that the tax rates of the banking sector should be aligned with other sectors.

    It is recommended, application of super tax on tax year 2018 should be removed to avoid the double charge of super tax in tax year 2019.

    Furthermore, it is requested that the same overall relief on super tax, granted to other industries, is also provided to the banking sector as well.